Should I Lease a Cell Phone?

Recently, I investigated whether or not I should lease a cell phone. What I found was not for the financial faint of heart.

Recently, I investigated whether or not I should lease a cell phone. What I found was not for the financial faint of heart.These days, cellular providers are looking for additional streams of revenue as older streams are dying off. One of the new trends in the business are cell phone leasing plans. Like leasing a vehicle, it is a similar type proposition. Overall, it is a very poor financial decision as I will detail below, and it is much less cost-effective than actually buying the phone itself.

I recently spent some time in an unnamed cellular store investigating whether or not I should lease a cell phone. What I found was disturbing.

Why You Shouldn’t Lease a Cell Phone

Basically, instead of spending $199 or $299 to get your new smartphone, you spend $20/month or so to lease the phone for a two-year period (generally). The cellular provider spreads the cost of the phone over those two years, usually at full retail price ($600 or so). Additionally, they can add on a monthly financing charge plus taxes. Of course, this is added to the cost to your monthly usage bill “for convenience.”

A big disadvantage of this plan is that at the end of your lease, you have nothing to show for it. You may have the option to purchase your now “old” phone for around $200, which is about what you could have purchased it for prior to the two-year leasing period. So, you definitely don’t come out ahead there.

Another reason not to lease a cell phone is this: If you damage the cell phone, you are required to repair or replace it before you turn it back in to the provider. If not, you may be forced to pay a hefty penalty at turn-in time. Of course, they sell a $15/month insurance plan (with a $100 deductible) “just in case” you damage their phone, encouraging buyers to make another poor decision on top of their decision to lease. Also, should you want to turn in your lease early, you may be assessed additional penalties.

Along with leasing phones, cellular companies have also started leasing other mobile and tablet products in conjunction with their cell lease plans. These may seem attractive at the beginning, but similar to the cell phone leasing plans, they carry many of the same disadvantages and penalties.

Other Cell Phone Options

A better financial choice, overall, would be one that my mom recently made. She is on a plan with Ting, which allows her much more flexibility in her cell plan. Essentially, she pays only for the minutes and data that she uses. Additionally through Ting, she was able to purchase a later-model iPhone at a deeply-discounted rate. I am not specifically endorsing Ting, but plans which allow you to only pay for what you use are much more amenable than getting stuck in a lease where you are forced to be at the mercy of a larger cell phone company who may change their plans on a whim and leave you with much less flexibility.

This Just In: Do Not Lease a Cell Phone

To summarize, do yourself a favor and do NOT lease a cell phone. The ONLY benefit is not having to come up with a larger lump sum when you initiate a new cellular plan. Of course, that easily is overcome by the larger fees and costs associated with leasing a phone.


4 thoughts on “Should I Lease a Cell Phone?

  1. Thanks for the post. We have been with Sprint for over 10 years and they want us to lease and will give us $15 per phone per month as a loyalty credit, so it’s like $5 per month which is about what you’d normally pay as the portion of your ‘buy’ on a 2 year contract. But, we’re trying to get away from Sprint as their service is very poor where we live. We have a few more months until all lines are free of current contract obligations, so we’ll see!

  2. Why on earth would anyone lease a cell phone?!! Sounds like another Big 4 rip off – or earily similar to subsidizing via a 2-year contract where you end up paying significantly more than if you bought the phone outright.

    Ting is a carrier worth investigating – so is Republic Wireless, which we’ve used nearly two years now. We bought Moto E’s for $99 and signed up for their $10 WiFi everything + unlimited cellular talk and text. When we travel we upgrade a phone plan temporarily to include cellular data. And change it back again when we get home – they prorate the bill accordingly. They recently announced a plan to refund customers for all unused cellular data that looks pretty cool. It’s pretty amazing – we used Verizon for 15+ years paying over $150 a month for two smartphones. Now we pay $20 and couldn’t be happier.

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